Tax isn't a miner threat as resources dig in

ARE the big miners bothered by a carbon tax? Not much. Not according to their share price movements last week. BHP didn't go up much but it didn't go down either.

By InvestSMART · 10 Jul 2011

By InvestSMART ·
10 Jul 2011

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ARE the big miners bothered by a carbon tax? Not much. Not according to their share price movements last week. BHP didn't go up much but it didn't go down either.

What about other industrial stocks, such as OneSteel or BlueScope? Still not bothered. A $10,000 investment in those two last week ended up at $11027 and $11618.

Maybe traders had already priced in any possible bottom-line impact or maybe they were just cheered by talks of compensation, aid and loan guarantees.

Our leader for the first week is Thida Kyaw. Her portfolio is chockers with mining and resource-related companies. She also likes Virgin Blue. As one of its main competitors is stuck on the ground - Tiger Airways, anyone? - it looks like Virgin Blue's share price might be heading up for a change. There is talk that fare prices might rise if Tiger can't get back in the air, which might augur well for Virgin's bottom line in the long term.

Dartboard aimed well when it landed on coal-seam gas company Blue Energy. As our best performer for the week, it was up $13,281, but Dartboard still languishes in sixth place due to holding the worst performer of the week - Cougar Energy - as well. It finished up at $7619.

That was no doubt thanks to confirmation that the Queensland government would be upholding its proposal to stop Cougar resuming underground coal gasification at its trial plant near Kingaroy.

The government is concerned the project is an environmental risk. Cougar was also a little peeved that it learnt of the decision via a media release and not direct contact. Bothered? Yes much.

Penny Pryor

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Frequently Asked Questions about this Article…

Did the proposed carbon tax meaningfully hurt big miners' share prices?

According to the article, not really — big miners weren't much bothered by carbon tax talk. BHP's share price didn't fall significantly and overall resource stocks held up, suggesting investors either priced in the impact or were reassured by talk of compensation, aid and loan guarantees.

How did industrial stocks like OneSteel and BlueScope perform after the carbon tax news?

The article reports positive short‑term outcomes: a $10,000 investment in OneSteel ended the week at $11,027 and the same investment in BlueScope finished at $11,618, indicating modest gains despite the tax discussions.

Why might traders not have reacted negatively to carbon tax headlines for resource companies?

The article suggests two plausible reasons: traders may already have priced any bottom‑line impact into share prices, or markets were buoyed by talk of compensation, government aid and possible loan guarantees that could offset costs.

Which companies and investor portfolios were highlighted as standout performers in the piece?

The article highlights Thida Kyaw as the week's leader with a portfolio heavy in mining and resource companies. It also notes Blue Energy as the week's best performer (up $13,281 for the portfolio named Dartboard) and Cougar Energy as the worst performer in that same portfolio.

What did the article say about Virgin Blue and its position relative to Tiger Airways?

The article notes that Virgin Blue could benefit if competitor Tiger Airways remains grounded. With talk that airfares might rise if Tiger can't resume flying, Virgin Blue's share price and long‑term bottom line might improve as a result.

What happened with Cougar Energy and the Queensland government decision?

Queensland decided to uphold a proposal to stop Cougar Energy from resuming underground coal gasification at its trial plant near Kingaroy, citing environmental risk. Cougar was also upset that it learned of the decision via a media release rather than direct contact.

How did the Dartboard portfolio perform overall, given the week’s winners and losers?

While Dartboard had a strong individual gain from Blue Energy (up $13,281), it still languished in sixth place overall because it also held Cougar Energy, the week's worst performer. The article implies mixed results across holdings.

What practical takeaways for everyday investors does the article offer about resource stocks and policy risk?

The article suggests that short‑term share price reactions may be muted even when policy risks like a carbon tax surface — markets can factor in impacts or focus on compensation measures. It also highlights that company‑specific events (government decisions, competitor disruptions) can move individual stocks, so investors should watch both policy headlines and company news.